Biz Break: Oracle hits new highs as cloud-software revolution continues to show fruit

Today: Oracle (ORCL) stock reaches its highest point in more than a year after earnings show efforts at cloud software have paid off, a trend that has been pervasive for software companies in 2012. Also: Wall Street slows down as "fiscal cliff" discussions hit a snag, tech stocks follow same path.

Oracle established a new 52-week high Wednesday on Wall Street after the Redwood City software giant released earnings that showed its push into cloud software is paying off, a trend that has been behind several of Silicon Valley's biggest success stories in 2012.

Oracle's quarterly earnings report, released after the close of trading Tuesday, showed growth of 18 percent in profits despite just 3 percent growth in revenues, as the company's push into software as a service, or SaaS, paid off. Software sales increased 17 percent in the company's recently completed second quarter, with cloud versions of its software growing from $222 million to $230 million.

"We're in a position where we can now grow," he added in an interview with Bloomberg Television, a tough prospect for a company that is already so entrenched, but can be attributed to its efforts in cloud software, as hardware sales are stagnating.

Oracle was late to the cloud party, ceding that business to former executive Marc Benioff's Salesforce, a San Francisco software company that bet big on SaaS before it became popular. Oracle has pushed into the cloud in a big way in the past year through acquisitions, starting with the $1.5 billion purchase of RightNow Technologies. Since that October 2011 move, Oracle has gone on to snap up Dublin-based Taleo for $1.9 billion and smaller cloud companies, like Xsigo and Skire.

With its new cloud features rolling out earlier this year, the company has been building up its sales staff to push the software, which is hosted on Oracle's servers and access over the Internet on a subscription basis, which satisfies investors' craving for dependable revenues. The previous model for software was more cyclical, with revenues increasing with new or updated offerings.

"(Oracle's) investments and efforts to build out its product portfolio and sales capacity are clearly starting to pay off handsomely and enable it to navigate the rough seas," Stifel Nicolaus analyst Brad Reback told Reuters.

"They're more flexible in what they can sell" thanks to the diversification into the cloud, UBS Securities analyst Brent Thill told The Wall Street Journal. "They're becoming equipped to talk about virtually any project that you could be working on as a company."

Oracle is not alone in acquiring cloud companies, which has proved a boon for Silicon Valley: German software giant SAP agreed to buy San Mateo-based SuccessFactors for a whopping $3.4 billion in August, for example, and other, smaller deals have gone down.

Software companies' stock success couldn't help the rest of Wall Street, as solid increases to start the week ground to a halt Wednesday as Washington continued to bicker about a solution to the "fiscal cliff" while failing to accomplish anything substantial.

As has been the case since Obama was re-elected last month, the major stock indexes followed the trajectories of the "fiscal cliff" talks, and all three indexes dipped Wednesday after healthy gains Monday and Tuesday.

"We still think a deal is going to happen, but the timing of any deal is much more dubious at the moment," he added. "Both sides have really said that they don't think the other side is serious, and the clock is ticking." Albion Financial Group market strategist Jason Ware told The Wall Street Journal.

Tech stocks fall, Apple gets bad news on patent after markets close

Outside of software, Silicon Valley technology stocks did not perform well Wednesday, as the SV150 index declined 0.3 percent.

And the widely watched Standard & Poor's 500 index: Down 10.98, or 0.76 percent, to 1,435.81

Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.